Worries about Europe's debt crisis continued to dominate the week amid a series of lackluster debt auctions and rising eurozone bond yields.

Stocks around the world fell sharply as investors grew anxious, with the Dow dropping 4.8%, the S&P 500 losing 4.7% and the Nasdaq tumbling more than 5% this week. That marked the worst weekly declines for all three indexes since mid-September.

Mounting yields continued to trouble investors on Friday. Italian 10-year bond yields moved back above 7%, a level that eventually required bailouts for Greece, Portugal and Ireland. The Spanish 10-year yield also rose to within spitting distance of the worrisome level.

"We could fall into a vicious cycle where borrowing costs rise, triggering downgrades which then cause yields to increase further," said Kathy Lien, director of currency research at Global Forex Trading.

"European officials need to act and act quickly if they want to prevent Spanish yields from rising to Italian levels and to save Italy from paying more than 8% to borrow," said Lien, in a research note.

On Thursday, German Chancellor Angela Merkel and French President Nicolas Sarkozy continued to oppose eurobonds as a solution, but the leaders did suggest that some type of fiscal unity could help stem the crisis.

But any move would require a treaty change that all 27 European Union members would need to ratify, a process that could take years. That's among the options expected to be discussed when EU leaders gather in Brussels next month.

U.S. markets, which were closed Thursday for Thanksgiving, closed at 1 p.m. Friday, and trading volumes remained thin during the shortened session.

U.S. stocks ended Wednesday down more than 2%, as eurozone fears rumbled on and a preliminary report showed that Chinese manufacturing has slowed sharply.

Companies: Shares of AT&T (T, Fortune 500) eased after the telecom service provider said Thursday it was taking a $4 billion charge to cover the break-up fee it will owe, if its deal to acquire T-Mobile falls through. The FCC said earlier this week that it will oppose the merger, becoming the second regulatory body to do so.